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Article | 19 July 2023 | ESG
Reasons to eat less meat
In a world where poor diet is the most common cause of death and yet some governments struggle to feed their populace, it might seem strange that there are compelling reasons to eat less meat. Economically, meat production from livestock is inefficient. More than 80% of global farmland uses 20% of global fresh water to provide only 18% of our calorie requirements. The ethical argument is also strong, with 80 billion animals, primarily chickens, killed each year – about nine animals for each person on the planet.
Meat production is also environmentally destructive. The expansion of agricultural frontiers across biodiverse areas of Latin America and Asia is contributing to biodiversity loss and greenhouse gas production. Eating less meat can be associated with physical wellbeing. Across the developed world, daily consumption of red meat is estimated to be
3-6 times higher than recommended levels. This can contribute to health problems affecting the heart, kidneys and liver. Antibiotics used for livestock are also contributing to antibiotic resistance in humans.
What’s a flexitarian?
Some of these factors might have fed into the results of a widely quoted 2021 poll, in which 47% of Americans described themselves as ‘flexitarian’, a less strict form of vegetarianism. Plant based meat companies have existed for years. Among them Beyond Meat, founded in 2009, seemed well placed to take advantage of this shift in consumer appetites. The company’s founders saw the advantage in appealing not just to vegetarian and vegan consumers, but also to flexitarians as well as meat eaters. The Beyond Meat product comprises split pea and mung bean proteins. The production process uses heating, cooling and pressure to manufacture a product mimicking the texture of real meat. Beyond Meat burgers generate 90% less greenhouse gas emissions, while requiring 93% less land, 99% less water and 46% less energy.
Pie in the sky
Beyond Meat was one of the most successful Nasdaq listings in 2019. Within a few months the share price had appreciated by 840%. Fast forward to mid 2023, and the company’s value has fallen by more than 90%, while it struggles to generate any free cash momentum. Beyond Meat’s performance in the months following its listing certainly seemed excessive. With annual sales of only $88m in 2018 and loss making, it achieved a near $14 billion market capitalisation at its peak, one quarter the value of multinational food company Tyson Foods, which generated sales last year of $53 billion and controls around 20% of the US beef, pork and chicken market. Beyond Meat has had well flagged operational and cash flow problems. These include the botched launch of a new product, low plant utilisation, excess inventory and a shrinking distribution network.
Yet recent forecasts by Bloomberg and Barclays see the plant based food market capturing between 8% and 10% of the global protein market by 2029/30. Some of this optimism might reflect the growth of non diary milks such as Oatly, which have grown rapidly and accounted for 11% of grocery milk sales in 2021. The share price malaise for Beyond Meat (and also Oatly, which has also corrected by more than 90%) could indicate a broader issue with the scalability for meat-free alternatives. After research indicating that almost one quarter of all new UK food products in 2019 were labelled vegan, there are now numerous examples of manufacturers recently retreating from plant based food offerings, at least in the UK. Oatly has withdrawn its dairy free vegan ice cream tubs. Nestlé halted the UK sale of its meat free and alternative dairy brands in March 2023, not long after describing plant-based products as a “once-in-a-generation opportunity…”.
A perfect storm of macro and company specific events are weighing on Beyond Meat and its peers. Higher interest rates, which mean more demanding financial hurdles for both existing companies and potential entrants, suggest the shakeout could continue in what might already be a saturated market. Meat-free is a relatively small part of the alternative foods market, accounting for around 5% of consumers in the US and other western countries. While it is conceptually attractive to align the meat-free offering with a more healthy lifestyle and a climate friendly production process, alternative meat suppliers still need to operate commercially and compete directly with traditional meat producers. Starting from a low base, and with consumers now much more price sensitive, this may prove more difficult. Multinationals’ deeper pockets and their ability to conduct more extensive promotional campaigns places them at a significant advantage when promoting their own meat free options compared with smaller operators such as Beyond Meat.
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